Toward Well-Oiled Relations?

Over the last few years, China has definitively surpassed the United States as the world’s leading energy consumer and net importer of oil. Thus, China’s relations with the Middle East appear poised to become an ever more important issue with global implications, as the latter region possesses the world’s largest crude oil reserves.¹ In this pioneering volume, we attempt to clarify for lay readers several closely related topics that are critical to understanding the relevance of China’s rise to the aspirations of various Middle Eastern nations, how Chinese energy needs are changing, and the ways in which a more economically powerful China might seek to reconfigure its ties with various Middle Eastern stakeholders.

With few exceptions, all recent analyses and commentaries that link the US and China to the Middle East share similar conclusions, pointing to two main inter-related phenomena reflecting one fundamental assumption: that the US and China are engaged in a competition (or even rivalry) in the Middle East. Many seem to believe that the US is losing ground in the region because of its crippled commitment to its allies, its policy of “rebalancing” or “pivoting” to the Asia-Pacific region, and its expected withdrawal from Iraq and Afghanistan. Also, the US has allegedly become more self-reliant in terms of oil production and no longer needs Middle Eastern oil. Consequently, the conventional wisdom argues that the US is planning to gradually divest itself from the region. According to these views, Beijing will fill the vacuum created by the US withdrawal; indeed, it already seems to be ramping up its presence there. Reportedly, CCP media often hinted that if US redeployment in East Asia is implemented, China will seek to more visibly corner the US in the Middle East. Is Beijing interested in or capable of doing it? This chapter tries to challenge these conclusions and to offer alternative ones.

The relationship between Turkey and China has rarely been a point of focus for international observers in the early 21st century. However, the number of symposia, forums, panels, articles, columns, think tanks, and researchers focusing on Sino-Turkish relations has been increasing. The change is mostly due to the impressive rise of both Turkey and China as powers on both regional and global levels. Today, Turkey is the 16th largest economy and China the second largest, and they are beginning to pay attention to each other.

In 2002, Turkish General Tuncer Kilinc, Secretary General of the National Security Council (MGK)—Turkey’s top decision-making body, called for Turkey to seek alternatives to the European Union (EU) and North Atlantic Treaty Organization (NATO) and turn toward its old regional foes, Iran and Russia instead. ¹ Speaking at the conference, “How to Establish a Peace Belt Around Turkey,” held by the Military Academies Command, General Kilinc expressed frustrations at the EU’s policies towards Turkey and urged Ankara to start looking eastward for new allies. ² Although the notion was not taken seriously in the mainstream, “Eurasianism” as a geopolitical discourse caught on with some Turkish intellectuals. In 2004, Istanbul University convened a symposium entitled, “Turkish-Russian-Chinese and Iranian relationships on the Eurasian axis.” ³ A decade later, AK Party leader Recep Tayyip Erdogan is seriously considering abandoning the bid for EU membership to join the China-led and Russian- supported Shanghai Cooperation Organization (SCO). ⁴ On 26 September 2013, Turkey shocked its NATO allies when it chose a US-sanctioned Chinese firm to co-produce a US$3.4 billion long-range air and missile defense system. ⁵ Turkey, with its increasingly Eurasian geopolitical trajectory, seems to be at a crossroads of choosing whether to remain anchored in the West, or fundamentally shift its axis eastward toward Eurasia.

The Ürümqi riots of July 2009 were a political earthquake that jolted China’s confidence and image, inflicting particular damage on Beijing’s deepening ties with the Islamic world. Since then, the bloodshed from Xinjiang’s ethnic and religious strife has escalated to the point that China’s rulers constantly feel forced to prove that they can protect their own citizens — especially the Han Chinese — at home and around the world. As a result, China increasingly resembles a wounded Colossus — a burgeoning Great Power plagued by internal conflicts despite its looming influence in global affairs.

Iraq’s foreign relations consist of three major intersecting loops — the East, the West, and international institutions. The first circle of Iraq’s interactions deal with neighbouring, regional, and eastern powers, China being Iraq’s most important trade partner in the Eastern hemisphere. Iraq is also influenced by its relations with the Western powers — especially the United States, which has the greatest leverage with Iraq. Finally, Iraq interacts with international institutions.

Egypt is one of only five countries in the African continent that have been chosen by the Chinese government to host a special economic zone (SEZ). China has signed 33 investment promotion and protection agreements and 11 double taxation agreements with African countries. Algeria, The Democratic Republic of Congo, Nigeria, Egypt, and Zambia (out of 31 countries) received Chinese FDI flows of more than $100 billion. For comparison purposes, between 2005 and 2010, Nigeria had the lion’s share of Chinese investments, reaching approximately $15.35 billion. Comparatively, Algeria had $9.16 billion, Congo $5.89 billion, and Zambia $1.01 billion.

The United States (US), the world’s largest economy, seemed destined to continue its heavy reliance on imported fossil fuels. American oil production peaked in the early 1970s and the nation has become addicted to oil. With stagnant and declining production, foreign supplies increasingly met the gap between production and consumption. In the last several years however, technological innovation known as fracking has fundamentally changed the US energy outlook. This advance, along with changes in China and the Middle East, have substantially changed the energy landscape in the Middle East and, indeed, in the entire world. The US is now emerging as a major producer and exporter of natural gas, and to a lesser degree, petroleum. Feeling less vulnerable to interruptions in foreign energy supplies, some analysts and policymakers have predicted that the US will dis-engage from the Middle East.

January 2015 saw a rare visit to Israel by a Japanese Prime Minster. In light of Jerusalem’s increasingly troubled relations with many of its traditional Western allies, Shinzo Abe’s visit was something to celebrate. In the Prime Minister’s entourage were no fewer than 100 government officials and business people, as if to demonstrate just how qualitatively different bilateral relations have become compared with the 1970s, when most of Japanese industry observed the Arab boycott of Israel. Asia as a whole has already edged out the US as Israel’s second biggest trading bloc.¹

The relationship between the six states of the Gulf Co-operation Council¹ (GCC) and China is advancing quickly. There is plenty of evidence to demonstrate that both China and the GCC states recognise the growing value of partnership and have invested time, money, and effort to lift relations to a new level. In many ways, the relationship should be a natural fit: China is growing quickly (GDP was estimated at $13.39 trillion in 2013)², despite cyclical downturns, and is, therefore, energy hungry. Its growing population (estimated 1.4 billion in 2014)³ requires staggering amounts of energy; with an expanding middle class, oil demand is set to grow by 8 million barrels per day (MBD) to reach 18 MBD by 2035.⁴ The Gulf Arab states that make up the GCC hold approximately 33% of the world’s oil reserves,⁵ and Qatar operates the largest non-associated gas field and is the number one exporter of liquefied natural gas (LNG).⁶ Moreover, as energy demand amongst the Organization for Economic Cooperation and Development (OECD) countries stagnates and, in some cases, even declines, the GCC-China relationship looks set to strengthen.

China’s role in the Middle East tends to be viewed one dimensionally by both Western and Chinese analysts — with the focus on either China’s increasing need for energy imports or its rise as a strategic rival to the United States (US). Yet the reality of Chinese interests and policy in the Middle East is far more complex.

Contrary to a common perception, the robust, cooperative relation that exists between China and the Islamic Republic of Iran is about far more than oil. There is an unfortunate tendency to reduce the Sino-Iranian relationship to Iran’s supply and China’s consumption of oil. Petroleum supply is indeed one important dimension of the Sino-Iranian relationship, but it is an egregious simplification to reduce that relationship to oil. The relation between the People’s Republic of China (PRC) and the Islamic Republic of Iran (IRI) is also about two ambitious emerging powers who view each another as sharing many common interests and perspectives. They see one another as potential and important partners in what both believe will be a forthcoming era in which the US role in the world is much reduced. Broadly speaking, the Sino-Iranian relationship is about two like-minded and ambitious countries unhappy with the current state of US dominance of world affairs, who view a strong Sino-Iranian partnership as an important element of the post-US unipolar world that both aspire to create. It must immediately be stated, however, that this partnership operates in a context of an over-riding Chinese desire to maintain comity in relations with the United States for the sake of China’s economic development drive, and thus to avoid confrontation with the United States in the Middle East.¹ Reconciling these opposites requires considerable subtlety, camouflage, denial, and obfuscation.

Iran and China’s expanding economic and political relations have a significant regional and global impact that as of yet has not received much scholarly scrutiny. This chapter examines the historical roots, evolution, and development of the Sino-Iranian relationship with a special emphasis on post 1979 period. Many bilateral economic and political issues bind the two nations, such as trade in arms, energy, manufactured goods, and technology. But this relationship also has a political and strategic dimension that serves both nations well. Based on the analysis of the present dynamics, I speculate on possible future trends.

The last two decades have witnessed China’s expanding economic footprint in the Middle East. China is currently the foremost trading partner and largest oil importer of several Middle Eastern countries. With the implementation of Xi Jinping’s “One Belt, One Road” in 2015,¹ China looks set to further strengthen its economic and diplomatic influence in this region.